Rudel v. Hawaii Management Alliance Association

Filing 64

ORDER (1) GRANTING IN PART PETITIONER'S MOTION FOR DETERMINATION OF VALIDITY OF LIEN, ECF NO. 38 ; AND (2) DENYING RESPONDENT'S MOTION FOR PARTIAL SUMMARY JUDGMENT, ECF NO. 40 . Signed by CHIEF JUDGE J. MICHAEL SEABRIGHT on 10/31/2017. ( afc) Order furthermore directs parties to meet and confer, and then contact Magistrate Judge Richard Puglisi by November 7, 2017 to schedule a status conference "to address whether any further proceedings are necessary to dete rmine the amount, if any, of HMAA's lien (and if so, what type of proceeding, e.g., evidentiary submissions or a trial)." WRITTEN ORDER follows hearing held July 24, 2017. Minutes of hearing: ECF no. 54 . CE RTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry.

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII

RANDY RUDEL,

Civ. No. 15-00539 JMS-RLP
Petitioner,

ORDER (1) GRANTING IN PART
PETITIONER’S MOTION FOR
DETERMINATION OF VALIDITY
OF LIEN, ECF NO. 38; AND
(2) DENYING RESPONDENT’S
MOTION FOR PARTIAL
SUMMARY JUDGMENT, ECF NO.
40

vs.
HAWAII MANAGEMENT
ALLIANCE ASSOCIATION,
Respondent.

ORDER (1) GRANTING IN PART PETITIONER’S MOTION FOR
DETERMINATION OF VALIDITY OF LIEN, ECF NO. 38; AND
(2) DENYING RESPONDENT’S MOTION FOR PARTIAL SUMMARY
JUDGMENT, ECF NO. 40
I. INTRODUCTION
On December 29, 2014, Petitioner Randy Rudel (“Rudel”) crashed his
motorcycle into a vehicle allegedly making an illegal left turn in front of him. ECF
No. 1-2 at 7. He suffered catastrophic injuries, resulting in multiple surgeries and
partial amputations of his left leg and forearm. Id. Because of the accident,
Respondent Hawaii Management Alliance Association (“HMAA”) paid
$400,779.70 in health-insurance benefits under Rudel’s HMAA benefit plan (“the
Plan”). ECF No. 49-6 at 1-5. Rudel also received a $1.5 million third-party tort

1

settlement from the vehicle-driver’s liability insurance carrier. ECF No. 1-2 at 14.
HMAA then claimed a lien against Rudel, seeking reimbursement of the
$400,779.70 from his $1.5 million settlement, based on a reimbursement provision
in the Plan. ECF No. 49-6 at 1. Rudel filed this action to determine the validity of
HMAA’s claim of lien.
The court faces two Motions. Rudel filed a “Motion for
Determination of Validity of Claim of Lien of [HMAA],” ECF No. 38, ultimately
arguing that HMAA is not entitled to any reimbursement. HMAA responded with
a Motion for Partial Summary Judgment, ECF No. 40, contending that Rudel’s
action is preempted by the Employee Retirement Income Security Act of 1974
(“ERISA”), 29 U.S.C. §§ 1001 et seq., and that its lien is valid under the Plan. The
Motions raise complex and important questions involving two distinct ERISApreemption doctrines as applied to two interrelated Hawaii statutory provisions,
Hawaii Revised Statutes (“HRS”) §§ 431:13-103(a)(10) and 663-10.
Based on the following, Rudel’s Motion is GRANTED in part, and
HMAA’s Motion is DENIED.
///
///
///

2

II. BACKGROUND
A.

Factual Background
The circumstances of the December 29, 2014 accident, as well as the

severe nature of Rudel’s injuries, are not at issue in these Motions. For present
purposes, it is undisputed that Rudel was a member of an ERISA plan — an
HMAA employee-sponsored health benefits plan that provided him certain
insurance benefits, including medical care, treatment, and services for injuries
resulting from the accident. ECF No. 49-3 at 2.1 Nor is it disputed that HMAA
eventually paid $400,779.70 in accident-related expenses (at least as of November
16, 2015) out of total charges of $634,839.03.2 ECF No. 49-6. The Petition also

1

“[HMAA] dba Hawaii Medical Assurance Association” is “a Hawaii Mutual Benefit
Society.” ECF No. 41-2 at 1; see also ECF No. 38-3 at 1 (“[HMAA] is registered with the State
of Hawaii Department of Commerce and Consumer Affairs, Insurance Division, as a Mutual
Benefit Society[.]”).
2

HMAA paid Rudel’s medical expenses after Rudel filed a related suit on June 19, 2015
against HMAA under ERISA § 502(a), 29 U.S.C. § 1132(a). See Rudel v. Haw. Mgmt. All.
Ass’n, Civ. No. 15-00236 HG-BMK (D. Haw.). According to that suit, HMAA was refusing to
pay Rudel’s expenses because he declined to sign (claiming parts were contrary to Hawaii law as
an illegal insurance practice) a “Reimbursement Agreement” with a clause stating:
I agree to repay HMAA from any recovery received by me or on
my behalf from any other person or party, even if the recovery
does not specifically include medical expenses, is described as
general damages only, or is less than the total actual or alleged loss
suffered due to my injury or illness. HMAA shall be paid first
from such recovery and shall have a first lien against any such
recovery to the extent of its total payment of benefits. This lien
(continued . . .)
3

establishes that, on August 17, 2015, Allstate Insurance Company (which covered
the driver of the other vehicle) paid Rudel $1.5 million under a settlement that
Allstate represented was “the total applicable available policy limits.” ECF No. 12 at 54. The settlement agreement includes a clause stating:
The consideration paid herein constitutes general
damages incurred on the account of personal injury or
sickness and/or emotional distress resulting therefrom, as
defined by IRS Code Section 104(a)(2) and does not
duplicate medical payments, no-fault payments, wage
loss, temporary disability benefits or other special
damages previously received by Randy Rudel.
Id. at 52. The Petition contends that the value of Rudel’s claim against the
driver/tortfeasor exceeded $5.9 million, including $4 million in general damages.
Id. at 11. Finally, the record establishes that on November 16, 2015, HMAA
claimed (and still claims) a lien of $400,779.70 against Rudel’s $1.5 million
settlement. ECF No. 49-6.
(. . . continued)
will attach to and follow any recovery proceeds even if the
proceeds are distributed to another person or entity.
ECF No. 1-2 at 149. For its part, HMAA had apparently refused to pay based on certain terms in
the Plan, and on a provision in HRS § 431:13-103(a)(10)(C)(ii) (“For entities licensed under
chapter 432 or 432D: . . . Payment of claims to an individual who may have a third-party claim
for recovery of damages may be conditioned upon the individual first signing and submitting to
the entity documents to secure the lien and reimbursement rights of the entity and providing
information reasonably related to the entity’s investigation of its liability for coverage.”). ECF
No. 1-2 at 118-19. Rudel dismissed that suit after HMAA agreed to waive its requirement that
he sign the Reimbursement Agreement before he could receive medical benefits. See ECF No.
1-2 at 157.

4

B.

Legal Background
1.

HRS §§ 431:13-103(a)(10) and 663-10
The Hawaii Insurance Code, subject to certain exceptions, defines

“unfair methods of competition and unfair or deceptive acts or practices in the
business of insurance” as including the following:
(10) Refusing to provide or limiting coverage available to
an individual because the individual may have a thirdparty claim for recovery of damages; provided that:
(A) Where damages are recovered by judgment or
settlement of a third-party claim, reimbursement of
past benefits paid shall be allowed pursuant to
section 663-10;
HRS § 431:13-103(a) (emphasis added).3
3

Section 431:13-103(a)(10) continues in part:

(B) This paragraph shall not apply to entities licensed under chapter 386
[regarding workers compensation] or 431:10C [regarding motor vehicle
insurance]; and
(C) For entities licensed under chapter 432 [mutual benefit societies] or 432D
[health maintenance organizations]:
(i) It shall not be a violation of this section to refuse to provide or limit coverage
available to an individual because the entity determines that the individual
reasonably appears to have coverage available under chapter 386 or 431:10C; and
(ii) Payment of claims to an individual who may have a third-party claim for
recovery of damages may be conditioned upon the individual first signing and
submitting to the entity documents to secure the lien and reimbursement rights of
the entity and providing information reasonably related to the entity’s
investigation of its liability for coverage.

5

In turn, HRS § 663-10, entitled “Collateral sources; protection for
liens and rights of subrogation,” provides:
(a) In any civil action in tort, the court, before any
judgment or stipulation to dismiss the action is approved,
shall determine the validity of any claim of a lien against
the amount of the judgment or settlement by any person
who files timely notice of the claim to the court or to the
parties in the action. The judgment entered, or the order
subsequent to settlement, shall include a statement of the
amounts, if any, due and owing to any person determined
by the court to be a holder of a valid lien and to be paid
to the lienholder out of the amount of the corresponding
special damages recovered by the judgment or
settlement. In determining the payment due the
lienholder, the court shall deduct from the payment a
reasonable sum for the costs and fees incurred by the
party who brought the civil action in tort. As used in this
section, lien means a lien arising out of a claim for
payments made or indemnified from collateral sources,
including health insurance or benefits, for costs and
expenses arising out of the injury which is the subject of
the civil action in tort. If there is a settlement before suit
is filed or there is no civil action pending, then any party
may petition a court of competent jurisdiction for a
determination of the validity and amount of any claim of
a lien.
HRS § 663-10 (emphases added).4

4

Section 663-10(b) (as enacted in 2002) continues:
(b) Where an entity licensed under chapter 432 [mutual benefit
societies] or 432D [health maintenance organizations] possesses a
lien or potential lien under this section:
(continued . . .)
6

With §§ 431:13-103(a)(10) and 663-10, “the [Hawaii] legislature
intended to limit a health insurer’s right of subrogation[.]” Yukumoto v.

(. . . continued)
(1) The person whose settlement or judgment is subject to the lien
or potential lien shall submit timely notice of a third-party claim,
third-party recovery of damages, and related information to allow
the lienholder or potential lienholder to determine the extent of
reimbursement required. A refusal to submit timely notice shall
constitute a waiver by that person of section 431:13-103(a)(10).
An entity shall be entitled to reimbursement of any benefits
erroneously paid due to untimely notice of a third-party claim;
(2) A reimbursement dispute shall be subject to binding arbitration
in lieu of court proceedings if the party receiving recovery and the
lienholder agree to submit the dispute to binding arbitration, and
the process used shall be as agreed to by the parties in their binding
arbitration agreement; and
(3) In any proceeding under this section to determine the validity
and amount of reimbursement, the court or arbitrator shall allow a
lienholder or person claiming a lien sufficient time and opportunity
for discovery and investigation.
For purposes of this subsection:
“Timely notice of a third-party claim” means a reasonable time
after any written claim or demand for damages, settlement
recovery, or insurance proceeds is made by or on behalf of the
person.
“Third-party claim” means any tort claim for monetary recovery or
damages that the individual has against any person, entity, or
insurer, other than the entity licensed under chapter 432 or 432D.
Section 663-10(b), which applies to “entities licensed under chapter 432 or 432D,” was added in
2002 by Act 228, Hawaii Session Laws. As detailed later, Act 228 also amended § 431:13103(a)(10).

7

Tawarahara, 140 Haw. 285, 291, 400 P.3d 486, 492 (2017). 5 The legislative
history and intent behind both provisions becomes critically important in resolving
the Motions. As explained to follow, resolution ultimately turns on whether this
Hawaii law is “specifically directed toward entities engaged in insurance,”
Kentucky Ass’n of Health Plans v. Miller, 538 U.S. 329, 342 (2003), such that it is
— or parts of it are — “saved” from preemption for purposes of ERISA
§ 514(b)(2)(A), 29 U.S.C. § 1144(b)(2)(A). The court thus explains relevant
aspects of this history in detail, and as set forth in Yukumoto.
In invalidating a contractual subrogation clause in a non-ERISA
health insurance plan, Yukumoto recognized that:
[s]ituations involving tort recovery in personal insurance
contexts, like the instant case [of health insurance], often
include payment by the tortfeasor for intangible losses
such as life, death, health, pain and suffering, and
physical well being, where it is difficult to ascertain exact
measurements of loss. In this way, recovery for medical
insurance benefits and tort damages . . . does not
necessarily produce a windfall or duplicative recovery to
the insured.

5

In this context, “[s]ubrogation exists to provide insurers with a mechanism to recover
the costs of reimbursing injured insured parties.” Yukumoto, 140 Haw. at 292, 400 P.3d at 493
(internal quotation marks and citations omitted). It is “premised on the notion that an insured
should not be able to unduly benefit from a loss and thereby enjoy a double recovery from both
the insurer and the tortfeasor.” Id. at 291, 400 P.3d at 492 (internal quotation marks and citations
omitted). Thus, for present purposes, the court uses the terms “reimbursement” and
“subrogation” synonymously.

8

140 Haw. at 294, 400 P.3d at 495. And after analyzing the statutory language of
both provisions and the legislative history, Yukumoto concluded that “the [Hawaii]
legislature limited the type of damages from which a lienholder may be
reimbursed. The legislature did not provide that the lienholder may be reimbursed
from an insured’s recovery of general damages which, as mentioned previously,
are difficult to determine exactly.” Id. at 295, 400 P.3d at 496. Rather, § 663-10
provides that “the amount due and owing to any holder of a valid lien, [is] to be
paid to the lienholder from ‘special damages recovered by the judgment or
settlement.’” Id. The idea is that an injured person should not receive a “windfall”
— if someone recovers damages from a tortfeasor for medical costs that were
already (or will be) paid by a health insurer, the insured should not be entitled to
double-recovery. A health insurer should be entitled to (and limited to)
reimbursement from “special damages” obtained from a tort judgment or
settlement.
“[T]he legislative history of HRS §§ 663-10 and 431:13-103(a)(10)
demonstrates that a health insurer’s sole rights to reimbursement and subrogation
are provided for in those statutes, and that a health insurer’s right to subrogation is
therefore limited.” Id. at 295-96, 400 P.3d at 496-97 (emphasis added). The
statutory regime “allow[s] for collateral sources to be reimbursed when special

9

damages recovered in a judgment or settlement duplicate[] the amounts they had
paid.” Id. at 296, 400 P.3d at 497.
In particular, the Hawaii legislature passed Act 29 in 2000, “to ‘make
it an unfair or deceptive act to limit or withhold coverage under insurance policies
because a consumer may have a third-party claim for damages.’” Id. (quoting H.
Stand. Comm. Rep. No. 1330-00, in 2000 House J. at 1515).6 “Act 29 made clear
that collateral sources were required to pay benefits, and were limited to
reimbursement under [§ 663-10] in third-party personal injury situations.” Id.
(citing H. Stand. Comm. Rep. No. 1330-00).
And in 2001, “the legislature considered and subsequently passed
[Senate Bill (“S.B.”)] 940, which amended . . . HRS [§] 431:13-103(a)(10) to
expressly make it an unfair insurance practice for a health insurer to limit or
exclude insurance coverage to an insured who has a third-party claim for
damages.” Id. at 297, 400 P.3d at 498 (emphasis added) (citing S. Stand. Comm.
Rep. No. 107, in 2001 Senate J. at 987). “The purpose of S.B. 940 was to ‘make
mutual benefit societies (societies) and health maintenance organizations (HMOs)
6

Article 13 of Hawaii’s Insurance Code, HRS §§ 431:13-101 et seq. (entitled Unfair
Methods of Competition and Unfair and Deceptive Acts and Practices in the Business of
Insurance) was originally enacted in 1987 as part of a comprehensive restructuring of Hawaii’s
insurance code. See 1987 Haw. Sess. Laws Act 347, § 2. Section 663-10 was originally enacted
in 1986. See 1986 Haw. Sess. Laws Act 2 (reprinted at ECF No. 58-4).

10

subject to the unfair methods of competition and unfair and deceptive acts and
practices of the business of insurance, for refusing to provide or limiting coverage
to an individual having a third-party claim for damages.” Id. (quoting S. Stand.
Comm. Rep. No. 107).
That is, S.B. 940 (which was enacted in 2002 by Act 228 of the
Session Laws of Hawaii (“SLH”)) specifically amended § 431:13-103(a)(10) to
clarify that “Act 29, SLH 2000, established lien rights for health insurance benefits
paid[.]” Id. (quoting testimony of the State Insurance Commissioner). The
legislature’s intent in amending § 431:13-103 was “that societies and HMOs
promptly pay the benefits owing under their policies, and recoup their payments
from a third-party claim by lien as provided under section 663-10, HRS.” Id.
(quoting S. Stand. Comm. Rep. No. 107). Similarly, in passing Act 228, the
legislature explained:
Refusing to provide or limiting health coverage to
persons who have third-party claims for damages is not
permitted, except for reimbursement under section 66310, Hawaii Revised Statutes (HRS). This measure makes
such acts unfair insurance practices under article 13 of
the insurance code to eliminate any doubt that health
insurers have always been subject to these limitations
under section 663-10, HRS. Health insurers continue to
be entitled to reimbursement of their subrogation liens
under section 663-10, HRS.

11

Id. at 298, 400 P.3d at 499 (quoting Conf. Comm. Rep. No. 67-02, in 2002 House
J. at 1783). Act 228 removed statutory language appearing to exempt health
insurers, and added § 431:13-103(a)(10)(C), applicable to “entities licensed under
chapter 432 or 432D.” 2002 Haw. Sess. Laws Act 228, § 1. Act 228 also, as noted
earlier, added several paragraphs to § 663-10, specific to those entities. Id. § 2.
2.

HMAA’s Plan
In contrast to this Hawaii law, HMAA’s Plan defines a right of

reimbursement that is not limited to special damages. Specifically, the Plan’s
Summary Plan Description (“SPD”) provides, in part, as follows:
If you have complied with the rules above [regarding
cooperation], we will pay benefits in connection with the
injury or illness to the extent that the medical treatment
would otherwise be a covered benefit payable under this
SPD. However, we shall have a right to be reimbursed
for any benefits we provide, from any recovery received
from or on behalf of any third party or other source of
recovery in connection with the injury or illness,
including, but not limited to, proceeds from any:
• Settlement, judgment, or award;
• Motor vehicle insurance including liability insurance
or your underinsured or uninsured motorist coverage;
• Workplace liability insurance;
• Property and casualty insurance;
• Medical malpractice coverage; or
• Other insurance.

12

We shall have a first lien on such recovery proceeds, up
to the amount of total benefits we pay or have paid
related to the injury or illness. You must reimburse us for
any benefits paid, even if the recovery proceeds obtained
(by settlement, judgment, award, insurance proceeds, or
other payment):

• Do not specifically include medical expenses;
• Are stated to be for general damages only;
• Are for less than the actual loss or alleged loss
suffered by you due to the injury or illness;
• Are obtained on your behalf by any person or entity,
including your estate, legal representative, parent, or
attorney;
• Are without any admission of liability, fault, or
causation by the third party or payer.
....
If we are entitled to reimbursement of payments made on
your behalf under these rules, and we do not promptly
receive full reimbursement pursuant to our request, we
shall have a right of set-off from any future payments
payable on your behalf under this SPD.
....
The amount of recovery to be reimbursed or otherwise
paid to HMAA is not reduced by any expenses, such as
attorneys’ fees incurred in connection with the recovery.
Accordingly, the common fund doctrine is not to be
applied. In addition, the “make-whole” rule of insurance
law, which holds that an insurance company may not
enforce a right of subrogation or third-party
responsibility until the insured party has been fully
compensated for any injuries, also does not apply.
ECF No. 49-5 at 4-5 (emphases added).

13

In short — in conflict with Hawaii law — HMAA’s Plan provides that
HMAA’s reimbursement rights apply even if the recovery proceeds are not for
special damages, i.e., the proceeds do not include medical expenses or are stated to
be for general damages only. Id. The present action arises from this conflict:
Rudel contends that the Plan’s language is invalid under Hawaii law; HMAA
contends that ERISA preempts that Hawaii law, and seeks to enforce the Plan’s
reimbursement provisions.
C.

Procedural History
1.

HMAA Removes the Action From State Court, and Rudel Moves to
Remand
On December 9, 2015, Rudel filed this Petition against HMAA

“pursuant to HRS §§ 431:13-103(a)(10) and 663-10” in the Third Circuit Court,
State of Hawaii. ECF No. 1-2. HMAA then removed the action to this court on
December 29, 2015, asserting federal jurisdiction under ERISA §§ 502(a) & (e), 29
U.S.C. §§ 1132(a) & (e). ECF No. 1 at 2. HMAA’s Notice of Removal alleged
that “a petition for determination of validity and amount of lien filed in state court
that falls within the scope of the civil enforcement provisions of ERISA is
completely preempted and hence removable to federal court.” Id. at 3-4 (citing
Aetna Health, Inc. v. Davila, 542 U.S. 200 (2004) (other citation omitted)).

14

Rudel filed a Motion to Remand on January 27, 2016, arguing that
HMAA improperly removed the action. ECF No. 10. Extensive proceedings
ensued to adjudicate the Motion to Remand. And because those proceedings are
particularly relevant to understanding the current Motions, the court describes that
background in detail.
On March 31, 2016, a magistrate judge issued Findings and a
Recommendation (“F&R”), recommending that the Court remand the action to
state court for lack of subject-matter jurisdiction. ECF No. 15. On April 14, 2016,
HMAA objected to the F&R pursuant to 28 U.S.C. § 636(b)(1) and Federal Rule of
Civil Procedure 72(b), ECF No. 18, and Rudel responded to HMAA’s Objection
on April 28, 2016, ECF No. 20.
At that time, the same issue regarding “complete preemption” of
§§ 431:13-103(a)(10) and/or 663-10 by ERISA § 502(a) was pending in the
District of Hawaii before Judge Susan Oki Mollway in Noetzel v. Hawaii Medical
Service Association, Civ. No. 15-00310 SOM-KJM. One day before Rudel’s
Response was filed, on April 27, 2016, Judge Mollway issued an order in Noetzel
rejecting a similar F&R that had recommended remanding that action. See Noetzel
v. Haw. Med. Serv. Ass’n (“Noetzel I”), 183 F. Supp. 3d 1094, 1111 (D. Haw.
2016) (concluding that the court had jurisdiction under ERISA § 502).

15

Accordingly, in May 2016, the parties in this case filed supplemental briefing to
address Noetzel I. ECF Nos. 23, 24. On June 14, 2016, this court stayed
consideration of the Motion to Remand, pending a decision by Judge Mollway on a
subsequent motion for reconsideration of Noetzel I. ECF No. 25. And on July 27,
2016, Judge Mollway issued a detailed order denying reconsideration of Noetzel I.
See Noetzel v. Haw. Med. Serv. Ass’n (“Noetzel II”), 2016 WL 4033099 (D. Haw.
July 27, 2016).
2.

The Action Was Properly Removed Under § 502(a)
On August 1, 2016 — having considered the original and

supplemental briefing, as well as Noetzel I and Noetzel II — this court issued an
order also rejecting the F&R and denying the Motion to Remand. ECF No. 26;
Rudel v. Haw. Mgmt. All. Ass’n, 2016 WL 4083320 (D. Haw. Aug. 1, 2016).
Applying a two-part test articulated by the Supreme Court in Davila, the court
concluded that HMAA properly invoked ERISA § 502(a)’s complete preemption
exception to the well-pleaded complaint rule. 7 That is, although Rudel’s “wellpleaded” Petition invokes only state law (§§ 431:13-103(a)(10) and/or 663-10),
7

Under Davila, a state law claim is completely preempted if: (1) the plaintiff “could
have brought his claim under ERISA § 502(a)(1)(B) . . . [and (2)] “there is no other independent
legal duty that is implicated by a defendant’s actions.” Davila, 542 U.S. at 210. “The complete
preemption doctrine applies to the other subparts of § 502(a) as well.” Fossen v. Blue Cross &
Blue Shield of Mont., Inc., 660 F.3d 1102, 1108 (9th Cir. 2011) (citation omitted).

16

“‘[w]hen a federal statute wholly displaces the state-law cause of action through
complete pre-emption,’ the state claim can be removed.” Davila, 542 U.S. at 207
(quoting Beneficial Nat’l Bank v. Anderson, 539 U.S. 1, 8 (2003)). “This is so
because ‘when the federal statute completely pre-empts the state-law cause of
action, a claim which comes within the scope of that cause of action, even if
pleaded in terms of state law, is in reality based on federal law.’” Id. at 207-08
(quoting Anderson, 539 U.S. at 8).
Specifically, ERISA § 502(a), “sets forth a comprehensive civil
enforcement scheme that completely preempts state-law causes of action within the
scope of these civil enforcement provisions.” Fossen v. Blue Cross & Blue Shield
of Mont., Inc., 660 F.3d 1102, 1107 (9th Cir. 2011) (citations, quotation marks, and
brackets omitted). ERISA § 502(a) provides:
A civil action may be brought —
(1) by a participant or beneficiary —
....
(B) to recover benefits due to him under the terms of
his plan, to enforce his rights under the terms of the
plan, or to clarify his rights to future benefits under
the terms of the plan[.]
29 U.S.C. § 1132(a). ERISA § 502(a)(3) further authorizes a “participant,
beneficiary, or fiduciary (A) to enjoin any act or practice which violates any
provision of this subchapter or the terms of the plan, or (B) to obtain other
17

appropriate equitable relief (i) to redress such violations or (ii) to enforce any
provisions of this subchapter or the terms of the plan[.]” 29 U.S.C. § 1132(a)(3).
“[A]ny state-law cause of action that duplicates, supplements, or supplants the
ERISA civil enforcement remedy [in § 502(a)] conflicts with the clear
congressional intent to make the ERISA remedy exclusive and is therefore
[completely] pre-empted.” Davila, 542 U.S. at 209.
This court determined that Rudel is seeking “to recover benefits due
to him under the terms of his plan,” or “to enforce his rights under the terms of the
plan.” Rudel, 2016 WL 4083320, at *2 (quoting § 502(a)(1)(B)). He also could
have filed a § 502(a) action to “clarify his rights to future benefits under the terms
of the plan.” 29 U.S.C. § 1132(a)(1)(B). As stated in Noetzel I,
Under ERISA § 502(a)(3), [petitioner] could have
brought a claim to enjoin [the insurer] from enforcing
those parts of the Plan that required that [the insurer] be
reimbursed. [Petitioner] could have even asked the court
to declare that the Plan’s reimbursement terms were
overbroad or illegal and to enforce the remaining terms
of the Plan.
183 F. Supp. 3d at 1106 (citations omitted); see also Noetzel II, 2016 WL 4033099,
at *3 (“[Petitioner] could have brought a claim asserting that [the insurer’s] lien did
not entitle [the insurer] be reimbursed for benefits paid to [petitioner] under the
plan because the plan’s terms permitting reimbursement of settlement amounts

18

equivalent to general damages are allegedly void under Haw. Rev. Stat. § 66310.”). Further, the Plan’s benefits and terms (and interpretation and validity of
those terms) are squarely at issue, as Davila also requires. Thus, the court
concluded that Rudel’s Petition is completely preempted under § 502(a). Rudel,
2016 WL 4083320, at *4.
3.

This is Now a § 502(a) Action
Because the case was properly removed to federal court, the action

now continues as if it had been filed as a § 502(a) action. See, e.g., Marin Gen.
Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941, 945 (9th Cir. 2009) (“If a
complaint alleges only state-law claims, and if these claims are entirely
encompassed by § 502(a), that complaint is converted from ‘an ordinary state
common law complaint into one stating a federal claim for purposes of the wellpleaded complaint rule.’”) (quoting Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 6566 (1987)); Singh v. Prudential Health Care Plan, Inc., 335 F.3d 278, 292 (4th Cir.
2003) (“Because we have found that at least some of Singh’s claims are completely
preempted, leading to their conversion into federal claims and their removal to
federal court, those completely preempted claims must now be decided by the
district court.”); Darcangelo v. Verizon Commc’ns, Inc., 292 F.3d 181, 195 (4th
Cir. 2002) (“[W]hen a claim under state law is completely preempted and is

19

removed to federal court because it falls within the scope of § 502, the federal
court should not dismiss the claim as preempted, but should treat it as a federal
claim under § 502.”).
Proceeding as a § 502(a) action, Rudel filed his “Motion for
Determination of Validity of Claim of Lien of [HMAA]” on April 25, 2017. ECF
No. 38. HMAA responded with its Motion for Partial Summary Judgment on May
8, 2017. ECF No. 40. The parties filed corresponding Oppositions and Replies,
ECF Nos. 49, 50, 52, 53, and the court heard both Motions on July 24, 2017. ECF
No. 54. At the court’s request, ECF No. 55, the parties filed supplemental briefs,
ECF Nos. 60, 61. The Motions are now ready to be decided.
III. ANALYSIS
The parties agree that HMAA’s reimbursement provisions conflict
with Hawaii law. Rather, the dispositive question is whether Hawaii law is
preempted, at least where an ERISA plan is at issue. 8
A.

ERISA Preemption
This is a complicated area of the law. And it’s important to

understand that two distinct ERISA preemption doctrines are involved. That is,

8

For a non-ERISA plan, Yukumoto held that the statutes take precedence over contrary
contractual subrogation rights. 140 Haw. at 299, 400 P.3d at 500.

20

There are two strands to ERISA’s powerful preemptive
force. First, ERISA section 514(a) expressly preempts
all state laws “insofar as they may now or hereafter relate
to any employee benefit plan,” 29 U.S.C. § 1144(a), but
state “laws . . . which regulate insurance, banking, or
securities” are saved from this preemption. 29 U.S.C.
§ 1144(b)(2)(A).
Second, ERISA section 502(a) contains a
comprehensive scheme of civil remedies to enforce
ERISA’s provisions. See 29 U.S.C. § 1132(a). A state
cause of action that would fall within the scope of this
scheme of remedies is preempted as conflicting with the
intended exclusivity of the ERISA remedial scheme,
even if those causes of action would not necessarily be
preempted by section 514(a).
Cleghorn v. Blue Shield of Cal., 408 F.3d 1222, 1225 (9th Cir. 2005) (citation and
internal brackets omitted).
Litigants and courts sometimes confuse the two doctrines, and
occasionally use their terminology interchangeably. See, e.g., Marin Gen. Hosp.,
581 F.3d at 944-46 (“The parties in this case have not clearly understood the
difference between complete preemption under ERISA § 502(a) . . . and conflict
preemption under ERISA § 514(a). . . . We may have been partially responsible
for the parties’ confusion [because] . . .[s]ome of our prior opinions dealing with
complete preemption under § 502(a) have used the terminology ‘relate to’ even
though that terminology is relevant to conflict preemption under § 514(a) rather
than complete preemption under § 502(a).”) (citations omitted). Further, applying
21

§ 514 is sometimes difficult because “congressional language seems
simultaneously to preempt everything and hardly anything[.]” Rush Prudential
HMO, Inc. v. Moran, 536 U.S. 355, 365 (2002). “While Congress occasionally
decides to return to the States what it has previously taken away, it does not
normally do both at the same time.” Metro. Life Ins. Co. v. Mass., 471 U.S. 724,
740 (1985).
“Complete preemption under § 502(a) is ‘really a jurisdictional rather
than a preemption doctrine, as it confers exclusive federal jurisdiction in certain
instances where Congress intended the scope of a federal law to be so broad as to
entirely replace any state-law claim.’” Marin Gen. Hosp., 581 F.3d at 945
(quoting Franciscan Skemp Healthcare, Inc. v. Cent. States Joint Bd. Health &
Welfare Tr. Fund, 538 F.3d 594, 596 (7th Cir. 2008) (brackets omitted)). “But . . .
§ 502(a) conflict [or “complete”] preemption is distinct from express preemption
[under § 514].” Fossen, 660 F.3d at 1111 (citation omitted). “Whether or not the
state [law] is exempt from § 514 . . . express preemption, it may still be conflict
preempted under § 502(a)[.]” Id. at 1112. That is, “[p]reemption under ERISA
§ 502(a) is not affected by [§ 514].” Cleghorn, 408 F.3d at 1226 n.6. “[T]he
question whether a law or claim ‘relates to’ an ERISA plan is not the test for

22

complete preemption under § 502(a)(1)(B). Rather, it is the test for conflict
preemption under § 514(a).” Marin Gen. Hosp., 581 F.3d at 949.
With this background, HMAA raises two interrelated arguments in
favor of preemption: First, it argues that the Plan’s terms control — regardless of
§ 514 — because the court has already determined that Hawaii law is completely
preempted under § 502(a). Second, it maintains that Hawaii law is expressly
preempted under ERISA § 514(a), and is not saved from such express preemption
under ERISA § 514(b)(2)(A). The court addresses each argument in turn.
B.

Hawaii Law Can Provide The “Relevant Rule of Decision” For This
§ 502(a) Action
As detailed previously, the court concluded when denying Rudel’s

Motion to Remand that Rudel was seeking a remedy under Hawaii law that could
have been brought under § 502(a), and there was no other independent legal duty
implicated by HMAA’s actions. Rudel, 2016 WL 4083320, at *2-3. Because the
court concluded that ERISA completely preempts Rudel’s state-law cause of action
under § 502(a), HMAA argues that the court can summarily conclude that the
subrogation/reimbursement provisions in its ERISA Plan are valid regardless of
whether state law might otherwise be “saved” from express preemption under
§ 514(b)(2)(A). HMAA points to Davila, which reasoned that “[u]nder ordinary
principles of conflict pre-emption . . . even a state law that can arguably be
23

characterized as ‘regulating insurance’ will be pre-empted if it provides a separate
vehicle to assert a claim for benefits outside of, or in addition to, ERISA’s
remedial scheme.” Davila, 542 U.S. at 217-18.
And, at first glance, HMAA’s argument appears to make sense.
Usually, a “preempted” law is not enforceable, and here “[p]reemption under
ERISA § 502(a) is not affected by [§ 514(b)(2)(A)].” Cleghorn, 408 F.3d at 1226
n.6. Indeed, HMAA relies on a subsequent order in Noetzel that appears to have
adopted such reasoning in cursorily granting summary judgment on the merits to
the health insurer:
The present motion seeks a substantive ruling that
Noetzel’s claims are preempted by ERISA. That is
precisely what the court determined in declining to
remand Noetzel’s claims. That is, although Noetzel pled
her claims as if they were based purely on state law, this
court found federal questions raised because Noetzel’s
claims were completely preempted by ERISA.
Consistent with the reasoning in both the denial of
remand and the denial of reconsideration of that remand
order, this court grants partial summary judgment to
HMSA, determining that Noetzel’s claims are preempted
by ERISA for the very reasons set forth in this court’s
earlier orders on the subject.
Noetzel v. Haw. Med. Serv. Ass’n, 2016 WL 7444939, at *3 (D. Haw. Dec. 27,
2016).

24

Upon closer examination, however, the issue is not so simple. Such
reasoning does not fully recognize the distinction between § 502(a) and § 514.
Moreover, even if a state-law claim “duplicates, supplements, or supplants” a
§ 502(a) remedy, it does not necessarily follow that parts of that state law cannot
be enforced. Rather, sometimes saved state law provides a “relevant rule of
decision” for a § 502(a) action. See, e.g., UNUM Life Ins. Co. of Am. v. Ward, 526
U.S. 358, 377 (1999) (reasoning that because a state law “notice-prejudice rule
complements rather than contradicts” ERISA’s rules regarding handling of claims,
it “supplied the relevant rule of decision for this § 502(a) suit”); id. at 376 n.7
(“Ward has sued under § 502(a)(1)(B) for benefits due, and seeks only the
application of saved state insurance law as a relevant rule of decision in his
§ 502(a) action.”); Roche v. Aetna, Inc., 167 F. Supp. 3d 700, 709 (D.N.J. 2016)
(“[P]reemption of a claim does not mean preemption of an entire theory of suit. A
state law claim may be preempted, but if the claim is under a law or regulation that
is saved under ERISA § 514(b)(2)(A), then that law or regulation can ‘suppl[y] the
relevant rule of decision for [an ERISA] § 502(a) suit’ so long as it is not providing
relief above and beyond what ERISA § 502 would provide.”) (quoting Ward, 526
U.S. at 377). In short, the terms of the state law must be examined.

25

Stated succinctly, “ERISA’s saving clause still ha[s] meaning[.]”
Haw. Mgmt. All. Ass’n v. Ins. Comm’r, 106 Haw. 21, 33, 100 P.3d 952, 964
(2004). “[T]he Hawaii legislature may continue to ‘regulate insurance’ so long as
the legislature does not create a ‘cause of action that duplicates, supplements, or
supplants the ERISA civil enforcement remedy.’” Id. (quoting Davila, 542 U.S. at
209) (brackets omitted)). “[A] state law that ‘regulates insurance’ is not preempted
so long as it does not create a new claim for relief and does not enlarge a claim for
benefits beyond that available in § [502(a)].” Id. at 34, 100 P.3d at 965.
Singh exemplifies the analysis (in nearly the same context that this
court now faces). In Singh, the Fourth Circuit examined a Maryland antisubrogation law, ultimately concluding that it was saved from express preemption
under § 514(b)(2)(A) as a law that “regulates insurance” under the test enunciated
in Miller, 538 U.S. at 342. See Singh, 335 F.3d at 286. In so doing, it reasoned:
[W]hile a State law purporting to supply additional
remedies to claimants under ERISA plans would
impermissibly compete with § 502(a) remedies, and
therefore not be saved from preemption as a result of the
limited exception from the saving clause, a State law
simply mandating or prohibiting certain terms of policy
coverage does not force a choice between State
regulation of insurance and the prescribed remedies of
§ 502(a) and therefore may be saved under
§ 514(b)(2)(A).

26

Id. at 287-88. The Maryland anti-subrogation provision “does not depend on any
particular remedy but operates simply to define the scope of a benefit provided to
members of HMOs in Maryland — i.e., entitlement to retain their full benefit and
not have it reduced by recoveries from third parties.” Id. at 288-89. “In this sense,
it does not differ from any other State law mandating or regulating a contractual
benefit.” Id. at 289. Because the law “does not supplement or supplant ERISA’s
exclusive remedies . . . it remains ‘saved’ and therefore ‘supplies the relevant rule
of decision’ in a § 502(a) claim to enforce the provision of State law[.]” Id.
(quoting Ward, 526 U.S. at 377). “A State law preserved as a regulation of
insurance under § 514(b)(2)(A) may supply a substantive term or mandate a
benefit in an employee benefit plan, but once that term or benefit becomes part of
the plan, a suit to enforce it may only be brought under § 502(a).” Id.
Singh went on to examine whether the action had been properly
removed from state court under § 502(a). It faced a complaint that “relying on
state-law causes of action . . . seeks some remedies that undoubtedly fall within the
scope of § 502(a), even if others might fall outside of its scope.” Id. at 290. For
that reason, the action was completely preempted, and the petitioner was limited to
“those remedies set forth in § 502(a).” Id. at 292. But Singh recognized that the

27

relief sought — application of the Maryland anti-subrogation law — could
continue in district court in a § 502(a) action:
Singh’s State common-law claims are claims for benefits
due under the terms of an ERISA plan and are therefore
“completely preempted,” such that federal removal
jurisdiction exists. In reaching the conclusion that
Singh’s claims seek to enforce a term of the Prudential
plan, we conclude that, although the Maryland HMO Act
‘relates’ to an employee benefit plan, it is saved as a
State regulation of insurance that does not conflict with
§ 502(a) of ERISA, such that it defines a term of the
ERISA plan. Because Singh’s claims seek to enforce a
term of the Prudential plan, as so modified by State law,
they are within in the scope of § 502(a) and must be
adjudicated as federal claims under that section.
Id. at 292-93. Rather than upholding the dismissal, Singh remanded “for
consideration of plaintiff’s claims to the extent they fall within the scope of
§ 502(a) of ERISA,” while “express[ing] no opinion on whether all of the relief
requested in the current complaint is consistent with the remedies supplied under
§ 502(a).” Id. at 293.
This analysis applies here. Parts of § 663-10 do create a cause of
action that “duplicates, supplements, or supplants” a § 502(a) remedy. It requires
“the court . . . [to] determine the validity of any claim of a lien against the amount
of the judgment or settlement” in “any civil action in tort.” HRS § 663-10(a). And
where there is no civil action pending, it authorizes “any party [to] petition a court

28

of competent jurisdiction for a determination of the validity and amount of any
claim of lien.” Id. At least to that extent, § 663-10 clearly supplements ERISA’s
remedial scheme under § 502(a), and so the action is completely preempted for
purposes of removal jurisdiction.
But the Petition must now be decided as a § 502(a) action. As such,
§ 431:13-103(a)(10) can still apply (if it is saved from express preemption as a law
“which regulates insurance” under § 514(b)(2)(A)). By itself, § 431:13-103(a)(10)
does not provide a remedy. 9 It provides “no new cause of action under state law
and authorizes no new form of ultimate relief.” Rush Prudential, 536 U.S. at 379.
Rather, as in Singh, it can “operate[] simply to define the scope of a benefit
provided” to members of HMAA’s Plan, “i.e., entitlement to retain their full
benefit and not have it reduced by recoveries from third parties.” Singh, 335 F.3d
at 288-89. That is, § 431:13-103(a)(10) — which specifically incorporates § 66310’s limitations on the scope of reimbursement allowable under Hawaii law — can
supply the relevant rule of decision in the § 502(a) action. See also Roche, 167 F.

9

If there were a private remedy to enforce § 431:13-103(a)(10), it might well be
completely preempted by § 502(a). But, as HMAA itself argues, there is no private cause of
action to enforce § 431:13-103. ECF No. 53 at 8-9; see, e.g., HRS § 431:13-107 (“All remedies,
penalties and proceedings set forth in this article are to be invoked solely and exclusively by the
[Insurance] commissioner.”); Wittig v. Allianz, A.G., 112 Haw. 195, 206 n.5, 145 P.3d 738, 749
n.5 (Haw. Ct. App. 2006) (“There is no private cause of action for violations of HRS § 431:13103[.]”).

29

Supp. 3d at 710 (“The [saved] subrogation prohibition contained [in a New Jersey
administrative code] therefore ‘supplies the relevant rule of decision’ for any
ERISA § 502(a) claim.”) (quoting Ward, 526 U.S. at 377).
HMAA argues that because its Plan is an ERISA plan, its terms must
apply precisely because they conflict with § 431:13-103(a). ECF No. 40-1 at 16;
ECF No. 49 at 9 (“[I]n an action brought under § 502(a)(3) based on an equitable
lien by agreement, the terms of the ERISA plan govern.”) (quoting US Airways,
Inc. v. McCutchen, 569 U.S. 88, 106 (2013)). But HMAA takes this conclusory
phrase too far — the Supreme Court has long rejected an insurer’s “‘contra plan
term’ argument [which] overlooks controlling precedent and makes scant sense.”
Ward, 526 U.S. at 375. The Supreme Court “ha[s] repeatedly held that state laws
mandating insurance contract terms are saved from preemption under
[§ 514(b)(2)(A)].” Id. (citations omitted). Under HMAA’s interpretation, “States
would be powerless to alter the terms of the insurance relationship in ERISA plans;
insurers could displace any state regulation simply by inserting a contrary term in
plan documents. This interpretation would virtually ‘rea[d] the saving clause out
of ERISA.’” Id. at 376 (quoting Metro. Life, 471 U.S. at 741); see also, e.g.,
Orzechowski v. Boeing Co. Non-Union Long-Term Disability Plan, 856 F.3d 686,

30

694 (9th Cir. 2017) (reiterating Ward’s reasoning that “[t]his interpretation would
virtually ‘read the savings clause out of ERISA’”).
The remaining question, then, is whether § 431:13-103(a)(10) (and
perhaps other aspects of Hawaii law) is actually saved from preemption under
§ 514(b)(2)(A). The court now turns to that question.
C.

Section 431:13-103(a) is Saved Under ERISA § 514(b)(2)(A)
To reiterate, ERISA § 514(a) expressly preempts “any and all State

laws insofar as they may now or hereafter relate to any employee benefit plan.” 29
U.S.C. § 1144(a). But ERISA § 514(b)(2)(A) saves from preemption “any law of
any State which regulates insurance, banking, or securities.” Id. § 1144(b)(2)(A).
The parties do not dispute that the Hawaii law at issue “relates to”
HMAA’s Plan. See, e.g., Standard Ins. Co. v. Morrison, 584 F.3d 837, 842 (9th
Cir. 2009) (“It is well-established that a law which regulates what terms insurance
companies can place in their policies regulates insurance companies.”) (citations
omitted); Singh, 335 F.3d at 284 (“State antisubrogation laws ‘relate to’ an
employee benefit plan.”) (citation omitted). The question, however, is whether
§ 431:13-103(a)(10) or § 663-10 “regulates insurance” for purposes of
§ 514(b)(2)(A).

31

A two-part test applies to make that determination: “First, the law
must be ‘specifically directed toward entities engaged in insurance,’ and second, it
‘must substantially affect the risk pooling arrangement between the insurer and the
insured.’” Orzechowski, 856 F.3d at 693 (quoting Miller, 538 U.S. at 342).
“ERISA’s saving clause ‘saves laws that regulate insurance, not insurers.’” Id.
(quoting Miller, 538 U.S. at 334).
“A law is specifically directed toward entities engaged in insurance if
it is ‘grounded in policy concerns specific to the insurance industry.’” Id. (quoting
Ward, 526 U.S. at 372). “[L]aws of general application that have some bearing on
insurers do not qualify.” Miller, 538 U.S. at 334. Under Miller, a state law that
“impos[es] conditions on the right to engage in the business of insurance” falls
under the savings clause. Id. at 338.
A law “substantially affects the risk-pooling arrangement between the
insurer and insured” if it alters “the scope of permissible bargains between insurers
and insureds.” Standard Ins. Co. v. Morrison, 584 F.3d 837, 845 (9th Cir. 2009)
(citing Rush Prudential, 536 U.S. at 355). A law that “dictates to the insurance
company the conditions under which it must pay for the risk that it has assumed
. . . qualifies as a substantial effect on the risk pooling arrangement[.]” Miller, 538
U.S. at 339 n.3. This requirement is aimed at ensuring that the laws in question are

32

“targeted at insurance practices, not merely at insurance companies.” Morrison,
584 F.3d at 844.
Applying these principles, § 431:13-103(a)(10) — falling within
Hawaii’s insurance code — easily meets both prongs of Miller. As its legislative
history set forth earlier amply demonstrates, the law was specifically directed at
insurance (indeed, at health insurance). The legislature expressly prohibited health
insurers (subject to certain exceptions) from denying or limiting coverage because
an insured also has a third-party claim for damages. Yukumoto, 140 Haw. at 297,
400 P.3d at 498. In return for that prohibition, § 431:13-103(a)(10) allows insurers
to seek reimbursement for duplicative benefits received by an insured from a
collateral source. But it limits that reimbursement right to special damages as set
forth in § 663-10. Id. at 295-96, 400 P.3d at 496-97. This was the Hawaii
legislature’s intent, and the statutory language is not ambiguous. An
antisubrogation law that “directly controls the terms of insurance contracts by
invalidating any subrogation provisions that they contain . . . does not merely have
an impact of the insurance industry; it is aimed at it.” FMC Corp. v. Holliday, 498
U.S. 52, 61 (1990).
Moreover, as the legislative history demonstrates, Act 29 (2000) and
Act 228 (2002) in particular of the Hawaii Session Laws are both laws

33

“specifically directed” at health insurance, and both affect the “risk pooling”
arrangement between an insured and insurer. See Yukumoto, 140 Haw. at 296-97,
400 P.3d at 497-98. Those Acts amended both § 431:13-103(a) and § 663-10.
Indeed, on that basis, some non-remedial provisions of § 663-10 might also be
saved,10 and would be applicable as a “relevant rule of decision.” Ward, 526 U.S.
at 377. It is enough, however, that § 431:13-103(a)(10) itself falls within ERISA
§ 502(b)(2)(A)’s savings clause.
HMAA emphasizes that § 663-10 is not specifically directed at
insurance because it refers to “any person” (not just insureds) and defines
reimbursement rights of any “persons or entities” (not just insurers). ECF No. 53
at 11. That is, it “regulates non-insurance parties as well as insurance entities” and
“applies in all civil actions, not merely those in which liability insurers will pay the
judgment.” Levine v. United Healthcare Corp., 402 F.3d 156, 165-66 (3d Cir.
2005). Under this logic, those parts of § 663-10 are “laws of general application
that have some bearing on insurers,” Miller, 538 U.S. at 334, which is insufficient
for the law to be “specifically directed” at insurance. See Levine, 402 F.3d at 166.
Even so, however, this only means that § 663-10 (or parts of it) is not a law

10

HMAA admits that a court may find that ERISA preempts conflicting portions of state
law while leaving other portions intact. ECF No. 61 at 12.

34

“regulating insurance.” It does not mean that all subrogation laws do not “regulate
insurance.” See, e.g., FMC Corp., 498 U.S. at 61; Roche, 167 F. Supp. 3d at 710.
And it certainly does not change the conclusion that § 431:13-103(a)(10) is
specifically directed at insurance, and saved from express preemption.
Accordingly, HMAA’s arguments fail; Rudel’s Petition survives
HMAA’s ERISA-preemption challenge. It is premature, however, to conclude that
Rudel fully prevails on his Motion, i.e., that HMAA is not entitled to any
reimbursement. Hawaii law still allows HMAA to be reimbursed for any
duplicative recovery that Rudel may have obtained. This is a matter of proof.
Although the settlement agreement between Rudel and Allstate stated that it was a
“general damages only” settlement, it may be that HMAA could seek to contest
that proposition. Or it may be that HMAA must concede that it has no evidence to
contradict that settlement agreement, especially here, given the catastrophic nature
of Rudel’s injuries. Additional proceedings may be necessary to address the
amount of reimbursement (which could be zero).
///
///
///
///

35

IV. CONCLUSION
This case aptly demonstrates that applying “the morass of ERISA
preemption law,” Morstein v. Nat’l Ins. Servs., Inc., 93 F.3d 715, 718 (11th Cir.
1996), can be confusing and difficult. And although at first blush appearing to be
inconsistent, the court’s conclusion that relevant aspects of Hawaii law are saved
from express preemption under ERISA § 514(b)(2) is indeed consistent with the
court’s prior Order concluding that Rudel’s Petition is subject to “complete
preemption” under ERISA § 502(a) for purposes of removal jurisdiction.
Although Rudel invoked remedial aspects of Hawaii law (HRS § 663-10(a)) that
§ 502(a) completely preempts, saved Hawaii law (at minimum, HRS § 431:13103(a)(10)) still provides the rule of decision in this particular § 502(a) action.
Consequently, Rudel’s Motion for Determination of Validity of Claim
of Lien of HMAA, ECF No. 38, is GRANTED in part. HMAA’s corresponding
Motion for Partial Summary Judgment, ECF No. 40, is DENIED. HMAA’s claim
of lien is limited to reimbursement of any duplicative recovery that Rudel may
have obtained. The court therefore directs the parties to meet and confer, and then
contact Magistrate Judge Richard Puglisi by November 7, 2017 to schedule a status
conference to address whether any further proceedings are necessary to determine

36

the amount, if any, of HMAA’s lien (and if so, what type of proceeding, e.g.,
evidentiary submissions or a trial).
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, October 31, 2017.

/s/ J. Michael Seabright
J. Michael Seabright
Chief United States District Judge

Rudel v. Haw. Mgmt. All. Ass’n, Civ. No. 15-00539 JMS-RLP, Order (1) Granting in Part
Petitioner’s Motion for Determination of Validity of Lien, ECF No. 38; and (2) Denying
Respondent’s Motion for Partial Summary Judgment, ECF No. 40

37